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Doug and Rachel recently bought their first house for $625 000. As first-time home buyers, they pay down a 15% down payment. The remaining amount is what they will mortgage. Their mortgage broker manages to find them a deal -/an interest rate of 2.67% for a mortgage amortized over 30 years. a) Determine their monthly payment. (KN-4)

Doug and Rachel recently bought their first house for $625 000. As first-time home buyers, they pay down a 15% down payment. The remaining amount is what they will mortgage. Their mortgage broker manages to find them a deal -/an interest rate of 2.67% for a mortgage amortized over 30 years. a) Determine their monthly payment. (KN-4)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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PART D: BUYING A HOME Doug and Rachel recently bought their first house for $625 000. As first-time home buyers, they pay down a 15% down payment. The remaining amount is what they will mortgage. Their mortgage broker manages to find them a deal -/an interest rate of 2.67% for a mortgage amortized over 30 years. a) Determine their monthly payment. (KN-4) Amount: b) Calculate the total amount paid for the mortgage over 30 years. (TH-3) c) How much interest will Doug and Rachel pay on their mortgage? (AP-2) d) How could they reduce the amount of interest that they pay? (CM - 3) KN: 14 AP: 12 TH: 13 CM: 13
Transcribed Image Text:PART D: BUYING A HOME Doug and Rachel recently bought their first house for $625 000. As first-time home buyers, they pay down a 15% down payment. The remaining amount is what they will mortgage. Their mortgage broker manages to find them a deal -/an interest rate of 2.67% for a mortgage amortized over 30 years. a) Determine their monthly payment. (KN-4) Amount: b) Calculate the total amount paid for the mortgage over 30 years. (TH-3) c) How much interest will Doug and Rachel pay on their mortgage? (AP-2) d) How could they reduce the amount of interest that they pay? (CM - 3) KN: 14 AP: 12 TH: 13 CM: 13
PART B: BORROWING MONEY Serena is going to college to study nursing. She estimates that she will need $35,000 to cover her three-year program. Her costs include living expenses, food, tuition, books and school supplies. She estimates that she will be able to save $12,500 from her summer job to help pay for college. She will borrow the remaining money for 5 years, compounded monthly at 3.8%. a) How much money will Serena be borrowing from the bank? (KN-2) b) What will Serena's monthly payments be? (AP-3) PV PMT FV Rate 3.8% Periods Compounding Monthly c) How much interest does she pay on the loan? (AP-2) = = = = = PART C: SAVING FOR THE FUTURE You and your best friend have decided that you are going to go an African Safari once you have graduated from college. You estimate that this trip of a lifetime will cost $12,000. You decide that you will start investing for your trip now. You will be investing money for 4 years in account with an interest rate of 6.15% compounded quarterly. a) How much will your quarterly payments be? (AP-3) PV PMT FV Rate Periods Compounding b) What will your total investment be after 4 years? (TH-3) = = = desold = = 6.15% Amount: Amount: c) How much interest have they earned on their investment? (AP-2) KN: 12 AP: /10 TH: 13
Transcribed Image Text:PART B: BORROWING MONEY Serena is going to college to study nursing. She estimates that she will need $35,000 to cover her three-year program. Her costs include living expenses, food, tuition, books and school supplies. She estimates that she will be able to save $12,500 from her summer job to help pay for college. She will borrow the remaining money for 5 years, compounded monthly at 3.8%. a) How much money will Serena be borrowing from the bank? (KN-2) b) What will Serena's monthly payments be? (AP-3) PV PMT FV Rate 3.8% Periods Compounding Monthly c) How much interest does she pay on the loan? (AP-2) = = = = = PART C: SAVING FOR THE FUTURE You and your best friend have decided that you are going to go an African Safari once you have graduated from college. You estimate that this trip of a lifetime will cost $12,000. You decide that you will start investing for your trip now. You will be investing money for 4 years in account with an interest rate of 6.15% compounded quarterly. a) How much will your quarterly payments be? (AP-3) PV PMT FV Rate Periods Compounding b) What will your total investment be after 4 years? (TH-3) = = = desold = = 6.15% Amount: Amount: c) How much interest have they earned on their investment? (AP-2) KN: 12 AP: /10 TH: 13
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